Correlation Between Bank Al and SME Leasing
Can any of the company-specific risk be diversified away by investing in both Bank Al and SME Leasing at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank Al and SME Leasing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Al Habib and SME Leasing, you can compare the effects of market volatilities on Bank Al and SME Leasing and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank Al with a short position of SME Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Al and SME Leasing.
Diversification Opportunities for Bank Al and SME Leasing
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and SME is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank Al Habib and SME Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SME Leasing and Bank Al is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank Al Habib are associated (or correlated) with SME Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SME Leasing has no effect on the direction of Bank Al i.e., Bank Al and SME Leasing go up and down completely randomly.
Pair Corralation between Bank Al and SME Leasing
Assuming the 90 days trading horizon Bank Al is expected to generate 1.84 times less return on investment than SME Leasing. But when comparing it to its historical volatility, Bank Al Habib is 6.3 times less risky than SME Leasing. It trades about 0.15 of its potential returns per unit of risk. SME Leasing is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 210.00 in SME Leasing on September 2, 2024 and sell it today you would lose (40.00) from holding SME Leasing or give up 19.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 61.41% |
| Values | Daily Returns |
Bank Al Habib vs. SME Leasing
Performance |
| Timeline |
| Bank Al Habib |
| SME Leasing |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank Al and SME Leasing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Al and SME Leasing
The main advantage of trading using opposite Bank Al and SME Leasing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Al position performs unexpectedly, SME Leasing can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SME Leasing will offset losses from the drop in SME Leasing's long position.| Bank Al vs. Oil and Gas | Bank Al vs. Pakistan State Oil | Bank Al vs. Pakistan Petroleum | Bank Al vs. Fauji Fertilizer |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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